Dao is written with the Chinese character 道 in both Traditional Chinese and Simplified Chinese. It typifies the most common Chinese character classification of "radical-phonetic" or "phono-semantic" graphs, which compound a "radical" or "signific" (roughly providing semantic information) with a "phonetic" (suggesting ancient pronunciation).

The traditional interpretation of the 道 character, dating back to the (121 CE) Shuowen Jiezi dictionary, was a rare huiyi 會意 "compound ideogram" or "ideogrammic compound". The道combination of chuo 辶 "go" and shou 首 "head" (numbers 162 and 185 in the Kangxi radicals) signified a "head going" or "to lead the way".

Dao is graphically distinguished between its earliest nominal meaning of dao 道 "way; road; path;" and the later verbal sense of "say". It should also be contrasted with dao 導 "lead the way; guide; conduct; direct; ". The Simplified character 导 for dao 導 has si 巳 "6th of the 12 Earthly Branches" in place of dao 道.

The earliest written forms of dao are bronzeware script and seal script characters from Zhou Dynasty (1045-256 BCE) bronzes and writings. These ancient dao characters more clearly depict the shou 首 "head" element as hair above a face. Some variants interchange the chuo 辵 "go; advance" radical with the xing 行 "go; road" radical, with the original bronze "crossroads" depiction written in the seal character with two 彳 and 亍 "footprints".

This "tao with the hand element" is usually identified with the modern character導 tao < d'ôg, "to lead," "guide," "conduct," and considered to be a derivative or verbal cognate of the noun tao, "way," "path." The evidence just summarized would indicate rather that "tao with the hand" is but a variant of the basic tao and that the word itself combined both nominal and verbal aspects of the etymon. This is supported by textual examples of the use of the primary tao in the verbal sense "to lead" (e. g., Analects 1.5; 2.8) and seriously undermines the unspoken assumption implied in the common translation of Tao as "way" that the concept is essentially a nominal one. Tao would seem, then, to be etymologically a more dynamic concept than we have made it translation-wise. It would be more appropriately rendered by "lead way" and "lode" ("way," "course," "journey," "leading," "guidance"; cf. "lodestone" and "lodestar"), the somewhat obsolescent deverbal noun from "to lead."

These Confucian Analects citations of dao verbally meaning "to guide; to lead" are: "The Master said, 'In guiding a state of a thousand chariots, approach your duties with reverence and be trustworthy in what you say" and "The Master said, 'Guide them by edicts, keep them in line with punishments, and the common people will stay out of trouble but will have no sense of shame."

The traditional interpretation of the 道 character, dating back to the (121 CE) Shuowen Jiezi dictionary, was a rare huiyi 會意 "compound ideogram" or "ideogrammic compound". The道combination of chuo 辶 "go" and shou 首 "head" (numbers 162 and 185 in the Kangxi radicals) signified a "head going" or "to lead the way".